Complainants stated Sequoia Capital, Thoma Bravo and Paradigm had been ‘incentivized’ to tout FTX by their $550m funding.
Former clients of Sam Bankman-Fried’s FTX have sued three enterprise capital and personal fairness companies, accusing them in a proposed class motion of fraudulently selling the cryptocurrency trade earlier than it went bankrupt.
In keeping with a grievance filed late Tuesday in San Francisco federal court docket, Sequoia Capital, Thoma Bravo and Paradigm had been “incentivized” in 2021 and 2022 to tout FTX by the greater than $550m they invested earlier than its sudden collapse.
The shoppers stated the defendants lent FTX an “air of legitimacy” by vouching that that they had examined its operations – with a Sequoia government as soon as saying “we did our homework” – and located them “protected and safe” for cryptocurrency buyers.
“Billions of {dollars}’ value of buyer belongings turned a casualty of the greed of Bankman-Fried and of his co-conspirators, such because the defendants,” the grievance stated.
The lawsuit seeks unspecified damages for alleged violations of California shopper safety legal guidelines, in addition to fraudulent inducement, intentional misrepresentation and civil conspiracy.
Earlier litigation accused celebrities like soccer quarterback Tom Brady, basketball guard Stephen Curry and actor Larry David of improperly inducing individuals to take a position with FTX.
Sequoia, Thoma Bravo and Paradigm didn’t instantly reply on Wednesday to requests for remark.
Bankman-Fried will not be a defendant.
The 30-year-old son of Stanford Regulation Faculty professors has pleaded not responsible to fraud and different expenses for allegedly looting billions of {dollars} from FTX clients. He’s dwelling along with his mother and father as a part of his $250m bail bundle.
A Manhattan federal court docket listening to about whether or not to tighten bail is scheduled for Thursday, after Bankman-Fried allegedly tried to speak improperly with potential authorities witnesses.
The case is Rabbitte v Sequoia Capital Operations LLC et al, US District Courtroom, Northern District of California, No. 23-00655.